AOL's Patch Gets a Haircut in Push For Profitability

Jeff Bercovici
,
Forbes Staff
I cover technology with an emphasis on social and digital media.

The days of AOL treating Patch like a garbage disposal for money are officially over.

The network of local news sites for suburban towns laid off around 20 employees in a reorganization meant to eliminate an inefficient layer of management. (The Wall Street Journal was among the first to report the cutbacks.) By reducing the number of geographic zones (from four to three) and teams (from 31 to 20) in its structure, the company was able to shed a number of more highly paid managers without exiting any of its 800-plus markets, says a Patch source.

Employees were told the reorganization is a step toward the goal of getting Patch to break-even on a run-rate basis by the end of 2013. AOL chairman Tim Armstrong promised investors that will be the case during the company's first quarter earnings call.

Armstrong said Patch is on track to book around $40 million in advertising revenue in 2012 after taking in virtually no money last year. While that's a big change, Patch's costs last year totaled around $160 million.

Getting the two lines to cross by the end of next year, then, will likely require further cost-cutting as well as revenue-boosting. That will be even more true if Patch's traffic doesn't start growing again.
After growing steadily through the first half of 2011, a period during which it was steadily expanding into new markets, the network's overall audience peaked at 10.6 million unique visitors per month last August, according to comScore. Since then, it's been flat.